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Putin's pipeline dream on hold

Russian President Vladimir Putin might soon be forced to abandon his project for a new pipeline bypassing Ukraine to deliver Russian natural gas to the European Union, Bloomberg reported on Thursday.

Putin's plans, however, have now been put in jeopardy by the rapid escalation of sanctions Russia and the EU have imposed onto each other, as a result of the political crisis in Eastern Ukraine.

Led by Gazprom, the $46bn (£27.6bn) South Stream project has been put on hold and its circumstances are unlikely to change in the short-term future, Eurasia Group said.

The New York-based risk research group cited the EU's policy to respond with economic sanctions to Russia's relationship with separatist groups in Eastern Ukraine as the main stumbling block in the project's path.

Gazprom's project would see a 1,520-mile (2,446km) pipeline run under the Black Sea and enter the EU in Bulgaria, bypassing Ukraine completely and thus ending Gazprom's reliance on Ukrainian gas-transit infrastructures.

As things stand, Ukraine will continue to remain a pivotal transit point for almost 50% of Gazprom's shipments to Europe and while, before the conflict began, the EU had mixed feelings about the project that position has now changed, as geopolitical tensions continue to rise.

"There's no way Europe is going to put South Stream negotiations back on the table now, given the larger geopolitical context of the Ukraine crisis," Emily Stromquist, a Eurasia analyst in London, said in an interview with Bloomberg.

"That, combined with a number of regulatory disputes about the pipeline and gas deliveries will push back the timeline a number of years."

Moscow's role in arming the pro-Russia separatists in Eastern Ukraine has seen the EU's support for the project dwindle, with the 28-country bloc seemingly intent to block Gazprom's plans.

The EU had previously casted doubts on the project, claiming the plan would violate the EU's open-access law, but the project had been strongly backed by some countries in the southern part of the continent.

"Politically it's very difficult for the Commission to support South Stream as this might be seen as depriving Ukraine of its leverage toward Russia," Katja Yafimava, a senior analyst at Oxford Institute for Energy Studies, told Bloomberg.

"But equally, it's very difficult for the EC to block South Stream as long as it can't ensure security of supply for its south-eastern European members by other means."

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